Telekomunikasi Indonesia (NYSE:TLK) reported third-quarter results last week. The Indonesian provider of voice and data services posted solid growth across the board, driven by high demand for data services and the addition of 12.4 million net new wireless subscribers.

Telkom Indonesia's third-quarter results: The raw numbers

Metric

Q3 2017

Q3 2016

Year-Over-Year Change

Revenue

$2.58 billion

$2.26 billion

9%

Net income

$437 million

$366 million

19%

GAAP earnings per share (diluted)

$0.44

$0.37

20%

Data source: Telkom Indonesia.

What happened with Telkom Indonesia this quarter?

  • The company reports its results in Indonesian Rupiah, not U.S. dollars. The Rupiah strengthened by 1.4% against the dollar between the third quarters of 2016 and 2017.
  • So far in 2017, Telkom Indonesia has grown its top-line revenues by 12.5% year over year while operating expenses were held to a 9.8% increase.
  • Data, internet, and IT services reported 50% sales growth and now accounts for 44% of the company's total revenues.
  • The Telkomsel wireless phone service now serves 190.4 million customers, a 7% boost from 178 million accounts in the second quarter of 2017. This includes 97.5 million smartphone customers, up from 82 million three months earlier.

What management had to say

The Indonesian rumor mill has been sending signals that Telkom is exploring some acquisition ideas. Management dodged these questions on the earnings call but did not entirely deny that there's something going on:

"For the M&A questions, unfortunately, there's nothing much we can share as of this moment given that we are still bound by confidentiality with some of the potential targets that we're talking to," said CFO Harry Zen, continuing:

However, rest assured that all the things that we're looking at the potential targets that could help us to realize our objective to become a digital telco in the future. And we've been also very, very careful in terms of selecting the profitability profile of the targets because we certainly don't want other targets to be so dilutive to our current profitability profile.

The skyline of Indonesian capital Jakarta.

Image source: Getty Images.

Looking ahead

Trailing revenues have increased by 26% over the last three years, while earnings and free cash flows increased by roughly 40% each.

The company is investing heavily into infrastructure upgrades, chiefly to support Telkomsel and high-speed fiber network runs. These expenses include trans-Pacific fiber installations, data satellite launches, and large bids in wireless spectrum auctions. As Zen noted above, Telkom is building a digital service for the long run.

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool recommends Telkom Indonesia. The Motley Fool has a disclosure policy.